FTSE 100 Rises From The Dust, Other Markets Follow Suit
The FTSE 100 made a smart recovery, jumping up around 3% and adding 193.9 points to close at 5689.1 on Tuesday, which was one of the highest gains in a single day in the past 2 months. The markets shot up after news that there was an unexpected increase in the number of existing home sales in the US during the month of February, thereby setting off optimism that the current sub-prime crisis might be coming to an end.
The recovery in the stock market was lead by banking stocks, notably HBOS, which had been a victim of false rumors just days back and had lost around 17% of its value in a span of just 2 hours. However it had managed to gain back around 7% of its value after the Bank's top management bought shares in the Bank to reassure investors that they had confidence in the long term prospects of the bank. Tuesday's surge saw the bank recover its lost 10% back and the bank's top management, which had just bought the shares might just be laughing their way to, well, the Bank! Even other banks such as Barclays saw a 6% rise in its shares, while Alliance and Leicester and Royal Bank of Scotland registered a rise of around 9%. Even shares of UBS, which is mired in the sub prime crisis saw a rise of more than 7% in its prices. Analysts say that the revised higher offer from JP Morgan for the beleaguered company Bear Stearns along with the positive news from the US housing market seems to have triggered the sudden jump in the stock market.
Companies other than banks also saw a steep rise in its fortunes. British Energy, which has indicated that it is open to a tie up or a takeover, saw its share prices rise to 662p whereas construction companies such as Persimmon saw its share prices rising to 754p and Taylor Wimpey shot up to 180.9p. There were some stocks that failed to rise like WM Morrison, which slid down to 276.75p but on the whole, most of the stocks went skywards. Analysts were hoping that the Bank Of England should follow the lead of the Federal Reserve in the US and should show more flexibility in providing cash to banks so that they could come out of the current liquidity crisis. The rise in the markets came amidst warnings, which were issued by the Confederation of British Industry [CBI] forecasting that the economic growth in the UK would be the weakest after the recession of 1990 and well below the level announced in the budget by the Chancellor, Mr. Alistair Darling. But the CBI also said that other than the financial and property sector, all the other sectors seemed to be running on a positive note. Mr. Richard Lambert, director general of CBI, however cautioned that “There is a crisis of confidence in the global financial marketplace”. He also stated that the credit conditions would remain tight for some more time and also reduced its projected growth figures for the 4th continuous quarter by bringing it down to 1.8%. The CBI also projected the inflation level to touch 3.2% in the 3rd quarter of 2008 and the trade deficit of the UK to jump to 46 billion pounds as compared to Mr. Darlings calculation of 38 billion pounds. With higher food, fuel and energy prices kicking in one after the other since the start of 2008, the spending power of the public is bound to be affected and even though the current year seems to have started on a disappointing note, the sudden rise in the stock market is welcome news for all.
The rise of the UK stock market has also rippled out to other markets across Europe, with markets in Germany and Paris rising smartly and has also positively affected stock markets in Japan, Hong Kong and India. So, after a depressing start to the new year, maybe its time for stock traders all around the world to wish each other A Happy New Year.
Article written by: Craig Parker - Make Money Expert |
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